A wealthy associate of Peter Mandelson who has poured money into Labour causes is the target of a stepped-up international bribery investigation, the Guardian can disclose.

According to legal sources, Victor Dahdaleh, a London-based aluminium trader, has had his Belgravia premises searched by the Serious Fraud Office, and offshore bank accounts linked to him are being examined in the Isle of Man and Channel Islands. He is also under criminal investigation by the US department of justice.

This follows allegations that Dahdaleh has used UK banking havens to make covert payment of millions of dollars to senior officials in the Gulf state of Bahrain, in order to overcharge their organisation by an estimated $65m a year.

At the time of the alleged bribe payments, Dahdaleh, who "vigorously contests" the allegations, was using some of his wealth in London to fund Labour-supporting thinktanks, including the Institute for Public Policy Research and the Policy Network, a group founded by Tony Blair and presided over by Mandelson.

Dahdaleh helped pay for a Mandelson-authored pamphlet and both Mandelson and Blair appeared at Dahdaleh-sponsored events. Mandelson referred to Dahdaleh as "Victor, my friend" and praised him as "a business dynamo, a public-spirited figure, and a big-hearted personality". Policy Network refuses to say how much cash he has given since 2005.

Dahdaleh sponsorship of more than £1m also helped the businessman to a governorship of the London School of Economics alongside Cherie Blair, and the presidency of an Anglo-Canadian trade body in London. He also persuaded both Mandelson and Blair to speak there. Another donation of more than $1m went to the US foundation set up by ex-president Bill Clinton.

Mandelson's stance has been that he was merely flattering a millionaire sponsor, and had no close relations with him. His spokesman told the Wall Street Journal, which referred to the issue last week: "These words should not be over-interpreted. Peter Mandelson is generally gracious toward the host, sponsor or chairman of whatever event he had been invited to address."

Dahdaleh's aluminium-related operations survived an Office of Fair Trading inquiry in Britain in 2004, which ruled they did not pose monopoly dangers.

The allegations against Dahdaleh centre around a previously unknown offshore entity in Jersey called United Legal Engineering Consultants Ltd [Ulec]. Investigators are reported to be examining whether it was used to make secret payments to top officials in Bahrain, who held Barclays offshore accounts in the Isle of Man.

Jersey company records show that Ulec is controlled by Dahdaleh and two members of his family, who give their address as Amman, Jordan – although Dahdaleh lives in Eaton Place, London, and has offices of his main company, Dadco, based nearby. He holds a Canadian passport.

The US department of justice started its investigation into Dahdaleh in 2008. Intervening in a civil lawsuit brought by the state-controlled Bahraini company, its anti-corruption unit disclosed Dahdaleh was "the subject of an ongoing federal criminal investigation". He had been acting as an agent or middleman for the US aluminium giant Alcoa, which was supplying the alumina feedstock under long-term contracts to the smelter operation in Bahrain, and denies wrongdoing.

It was alleged that, in order to jack up the price, millions of tons of alumina had been routed through Dahdaleh-controlled shell companies whose true ownership was hidden in the British Virgin Islands, Singapore and Switzerland. Last November, legal sources say, the SFO, acting on a treaty request for mutual legal assistance, conducted a search of Dardaleh's London premises. The SFO also has the power to impose production orders on British banks, and to liaise with parallel authorities in Jersey.

Last night Dahdaleh's lawyer at Allen & Overy, fraud specialist David Esseks, said: "We do not propose to comment on any of the points you raise save to point out they contain many errors and inaccuracies."